2010 (1) TMI 598 - AT - Service Tax

Cenvat credit - manufacturer of M.V. parts availed Cenvat credit of duty paid on the inputs and capital goods - credit of Service tax paid by them on the input service being used and received by them for the manufacture of finished goods - demand of duty - on the ground that the Service tax payment was made using Cenvat credit and not by cash/PLA - Commissioner (Appeals) held that a sum of amount related to Service tax payable on the services of Goods Transport Agency received in connection with the receipt of raw materials from the raw material suppliers - Held that - the respondent has been treated as provider of services of GTA in respect of input services of GTA used in connection with receipt of inputs - There is no specific bar in Rule 3(4) of Cenvat Credit Rules in utilising the credit for payment of Service tax payable by the respondent as a deemed service provider - appeal by the Department is rejected

Summary

Issues: Department's appeal against Commissioner (Appeals) order.

Analysis:
1. The Department appealed against the Commissioner (Appeals) order dated 3-1-2008, concerning the availing of Cenvat credit by the respondent manufacturer for duty paid on inputs, capital goods, and Service tax paid on input services. The original authority confirmed a demand of Rs. 68,632, stating that the Service tax payment was made using Cenvat credit instead of cash/PLA.

2. The Commissioner (Appeals) found that a portion of the amount related to Service tax payable on services of Goods Transport Agency (GTA) received for raw material transport. The Commissioner held that as recipients of GTA services, the respondents were deemed providers and thus paid the Service tax from the Cenvat credit account as per Rule 3 of the Cenvat Credit Rules.

3. The Department, represented by the Jt. CDR, reiterated the grounds of appeal and cited a Board clarification stating that although the respondents had to pay Service tax for services received, they could not be considered actual service providers.

4. The respondents argued that Rule 3 of the Cenvat Credit Rules allowed them to utilize credit for payment of Service tax for services provided by the recipient. They contended that as deemed providers of GTA services used for receiving inputs, they rightfully utilized the credit, which would result in lower excise duty on the final products even if they were required to pay in cash.

5. The Tribunal, after considering the submissions and records, noted that the respondent discharged duty liability partly from PLA and partly from the Cenvat Credit Account. The Tribunal recognized the respondent as a provider of GTA services for input services used in receiving inputs. Finding no specific prohibition in Rule 3(4) of the Cenvat Credit Rules against using credit for Service tax payment by a deemed service provider, the Tribunal upheld the Commissioner (Appeals) order, rejecting the Department's appeal.